It is usually the business owner who is required to submit the application for a business license and make sure that the business is operating lawfully, but this does not mean that all costs and deficiencies in the property are imposed upon him. In front of the licensing authority, the business and its applicant are examined; in the relationship with the renter, the lease and the planning status of the property determine who will be subject to adjustments, nonconforming use permits, and at risk if the license is not accepted.
Even before signing a contract, it is important to examineLicensing, Permits and Nonconforming UsesAnd the correlation between the planned use and the permit and the plan has begun. In checking commercial property it is also worthwhile to use a guide onPreliminary Tests in a Real Estate Deal.
A business license, to the extent required by the type of business, is personal and does not automatically pass from the previous tenant or the owner of the property to the new owner of the business. Therefore, the person who operates the business usually has to promote the licensing vis-à-vis the local authority; however, if the property itself turns out to be unsuitable for the agreed use, the question of who is responsible for the repair or arrangement vis-à-vis the lessor depends mainly on the contract and the presentations given before signing.
There are three things that tend to be separated: the business license, the suitability of use according to the building permit or the plan, and the physical condition of the property. A business can be loaded with licensing even when there is no planning problem, and on the other hand a property that seems suitable for trading may not be suitable for a restaurant, gym, production, clinic or other use requested by the business owner.
The local authority and certification authorities review the application according to the licensing item and the relevant requirements, such as safety, firefighting, sanitation or accessibility. If the requested use does not comply with the permit or the plan, a non-conforming use permit may be required. Such a procedure is not a substitute for a business license, and it sometimes delays the opening of the business or involves fees, professionals, and other planning implications.
A common mistake is to settle for a general sentence according to which "all licenses are on the renter". Such a formulation may create a dispute when the block is not a document of the business but an existing structure defect or design mismatch that was created long before the renter's entry. A good contract separates the operating responsibility of the business from the underlying condition of the property.
Sometimes the renter says that the property is "commercial" and therefore suitable for any activity, but the word commercial is not enough. A restaurant in the property that was previously used as a clothing store, for example, may need adjustments and other checks. Also a license that was previously a business does not guarantee that the new license will be granted: the license is personal, and the activity, the owner, the occupancy and the requirements may change.
Another difficulty is discovered when the plan or building permit does not match the actual use. So the tenant may already be committed to renting, renovating, suppliers and employees, while the planning process has not yet ended. An early warning sign is a vague answer such as "no one has ever asked for a license here before" or the lack of up-to-date property documents. Such an answer should lead to a review, not assuming that everything is in order.
The first mistake is to sign a long lease before a planning and licensing check. The second mistake is to assign the renter "any liability without distinguishing between the adjustments he seeks and the impairment or limitation that were in the property in advance. Another mistake is to start expensive works before checking whether they match the permit and the licensing conditions.
It should also not be assumed that the licensing process will be completed until the scheduled opening date. The date depends, inter alia, on the integrity of the documents, the type of business, the requirements of the confirming bodies, and the question of whether an additional planning procedure is required.
It is worthwhile to seek advice before signing when the business depends on the license, when it comes to activity with an audience, food, production or special equipment, and when the property has been otherwise used in the past.Licensing and Regulation of UsesCan help draft a contract that divides the risk clearly and identify a barrier before committing to rent and expenses.
The information in the article is general only. The warranty and options in each case depend on the type of business, the property documents, local authority requirements and the text of the agreement.
An article provides a framework. A sound decision requires reviewing the facts, documents and specific risks before moving forward.
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